See attached document for questions
Problem 613 Historical Realized Rates of Return Stocks A and B have the following historical returns: Year 2009 2010 2011 2012 2013 23.70% 13.00% 23.50 19.10 10.50 23.70 6.00 11.70 31.00 17.20 Calculate the average rate of return for each stock during the 5year period. Round your answers to two decimal places. Stock % A Stock % B Assume that someone held a portfolio consisting of 50% of Stock A and 50% of Stock B. What would have been the realized rate of return on the portfolio in each year? What would have been the average return on the portfolio during this period? Round your answers to two decimal places. Year 2009 2010 2011 2012 2013 Average Portfolio % % % % % % return Calculate the standard deviation of returns for each stock and for the portfolio. Round your answers to two decimal places. Std. rA % rB % Portfolio % Dev. If you are a riskaverse investor then, assuming these are your only choices, would you prefer to hold Stock A, Stock B, or the portfolio? SelectStock AStock BPortfolioItem 12 Problem 53 Current Yield for Annual Payments Heath Foods's bonds have 17 years remaining to maturity. The bonds have a face value of $1,000 and a yield to maturity of 8%. They pay interest annually and have a 12% coupon rate. What is their current yield? Round your answer to two decimal places. Problem 713 Nonconstant Growth Stock Valuation Simpkins Corporation does not pay any dividends because it is expanding rapidly and needs to retain all of its earnings. However, investors expect Simpkins to begin paying dividends, with the first dividend of $1.50 coming 3 years from today. The dividend should grow rapidly at a rate of 50% per year during Years 4 and 5. After Year 5, the company should grow at a constant rate of 10% per year. If the required return on the stock is 18%, what is the value of the stock today (assume the market is in equilibrium with the required return equal to the expected return)? Round your answer to the nearest cent. Do not round your intermediate computations. Problem 517 Bond Value as Maturity Approaches An investor has two bonds in his portfolio. Each bond matures in 4 years, has a face value of $1,000, and has a yield to maturity equal to 8.2%. One bond, Bond C, pays an annual coupon of 11%; the other bond, Bond Z, is a zero coupon bond. Assuming that the yield to maturity of each bond remains at 8.2% over the next 4 years, what will be the price of each of the bonds at the following time periods? Assume time 0 is today. Fill in the following table. Round your answers to the nearest cent. t Price of Bond C Price of Bond Z Problem 59 Bond Valuation and Interest Rate Risk The Garraty Company has two bond issues outstanding. Both bonds pay $100 annual interest plus $1,000 at maturity. Bond L has a maturity of 15 years, and Bond S has a maturity of 1 year. What will be the value of each of these bonds when the going rate of interest is 5%? Assume that there is only one more interest payment to be made on Bond S. Round your answers to the nearest cent. What will be the value of each of these bonds when the going rate of interest is 10%? Assume that there is only one more interest payment to be made on Bond S. Round your answers to the nearest cent. B on d L B on d S What will be the value of each of these bonds when the going rate of interest is 14%? Assume that there is only one more interest payment to be made on Bond S. Round your answers to the nearest cent. B on d L B on d S Why does the longerterm (15year) bond fluctuate more when interest rates change than does the shorterterm bond (1 year)? SelectIIIIIIItem 7 I. Longerterm bonds have more reinvestment rate risk than shorterterm bonds. II. Shorterterm bonds have more interest rate risk than longerterm bonds. III. Longerterm bonds have more interest rate risk than shorterterm bonds. Problem 65 Expected Return: Discrete Distribution A stock's return has the following distribution: Demand for the Probability of This Company's Products Weak Below average Average Above average Strong Demand Occurring Rate of Return if This 0.1 0.2 0.4 0.2 0.1 1.0 Demand Occurs (%) 45% 9 9 25 55 Calculate the stock's expected return. Round your answer to two decimal places. % Calculate the standard deviation. Round your answer to two decimal places. %
